Standing Committee B

[Mr. James Cran in the Chair]

Pensions Bill

Clause 91 - Administration levy

Question proposed [this day], That the clause stand part of the Bill. 
 Question again proposed.

Chris Pond: Before we were so rudely interrupted, I was answering the question asked by the hon. Member for Eastbourne (Mr. Waterson) about the role of the Secretary of State in relation to the administration levy. I am sure that the Committee will have been hanging on my last words of the morning, so let me add what I was about to say.
 As the pension protection fund will be funded by grant in aid, which we discussed in our lengthy debate on clause 90, the administration levy will recover the Secretary of State's expenditure. In practice, the Secretary of State's involvement will be minimal. The board will make recommendations to the Secretary of State about the rate needed to recover the amount of grant in aid each year. That will work on a flat-rate basis, in a similar way to the general levy that occupational pension schemes currently pay. 
 Once the rate has been approved, the regulator will carry out the practical collection of the administration levy on behalf of the Secretary of State. On a pragmatic point, we plan to introduce a system whereby the regulator collects all the PPF levies. That way, the schemes will receive only one bill, so easing their administrative burden. That is much like the situation with the council tax bill, which we are all used to receiving broken down into different elements. I hope that, with that explanation, the hon. Gentleman is happy for the clause to stand part of the Bill. 
 Question put and agreed to. 
 Clause 91 ordered to stand part of the Bill. 
 Clause 92 ordered to stand part of the Bill.

Clause 93 - Annual reports to Secretary of State

Question proposed, That the clause stand part of the Bill.

Nigel Waterson: We are delighted to have a double dose of you today, Mr. Cran.

James Cran: Order. That is the second time I have received abuse this afternoon. The first time it came from the Under-Secretary, who said that I had
 rudely interrupted him this morning. However, I forgive hon. Members.

Nigel Waterson: Looking on the bright side, at least you are being abused by hon. Members both sides of the Committee, Mr. Cran. [Interruption.] We have been joined by the hon. Member for Chesterfield (Paul Holmes), one of the Liberal Democrats; that is nice.
 I have a couple of questions. First, in subsection (4) there is rightly a requirement that the report be laid before both Houses of Parliament. Is it envisaged that there will automatically be a debate on it? I think we covered that when we discussed part 1, so I do not want to labour the point, and I understand that interest might wane as the fund goes from success to success. However, it would be sensible to hold such a debate, certainly in the first couple of years. I appreciate that the Under-Secretary cannot speak for the usual channels, but it would be nice to hear an expression of intent on that. 
 To go back to clause 88, does the Under-Secretary envisage that the statement of investment principles will be included in the annual report, among other things?

Chris Pond: My reference to the rude interruption was aimed at parliamentary procedures and not at all to you instructing us on them, Mr. Cran.
 It would not be normal to have a debate on the report laid before the House by the Secretary of State, although I quite understand the hon. Gentleman's suggestion that it would be of interest to Parliament. We want to ensure that it is subject to proper parliamentary scrutiny, but, as he says, a debate would be a matter for the usual channels. It is not envisaged that a provision for debate would be built into the legislation. 
 I think that the statement of principles will be included in the report. We will want the principles by which the board is to operate to be outlined in it. That will be an important part of the parliamentary scrutiny. 
 Question put and agreed to. 
 Clause 93 ordered to stand part of the Bill.

Clause 94 - Duty to notify insolvency events

George Osborne: I beg to move amendment No. 256, in
clause 94, page 57, line 14, at end insert 
 'who shall have a duty to inform the members of the scheme'.

James Cran: With this we may discuss the following amendments: No. 257, in
clause 96, page 60, line 13, at end insert 
 'who shall have a duty to inform the members of the scheme'.
 No. 258, in 
clause 97, page 60, line 29, after 'scheme', insert 
 'who shall have a duty to inform the members of the scheme'.
 No. 259, in 
clause 102, page 63, line 25, after 'scheme', insert 
 'who shall have a duty to inform the members of the scheme.'.
 No. 262, in 
clause 117, page 72, line 42, at end insert 
 'who shall have a duty to inform the members of the scheme'.

George Osborne: Unlike other Committee members, Mr. Cran, I have not been rude to you—[Hon. Members: ''Yet.''] Indeed.
 Amendment No. 256 relates to clause 94 and the other four amendments relate to later clauses. Without getting into a substantive discussion about the later clauses, it is worth touching on the principle. The amendments are basically the same in that they require the trustees and managers of a pension scheme to keep the members informed about what is happening to the scheme as it is dealt with by the PPF and the board. 
 It is probably wrong to use the term ''well managed'' because a well managed scheme would not be looked at by the PPF. One would hope that conscientious managers and trustees would keep members of the scheme fully informed about what was happening to it. However, that will not always be the case. There may be instances when trustees and managers are negligent or do not take the time and trouble to inform scheme members of what will be a traumatic experience for them. 
 We have spoken many times—indeed, we mentioned it only this morning—of the anxiety that people feel when their pension is in trouble, the company is facing insolvency and their scheme may be underfunded. That could be the most stressful experience of their life. Without straying into the subject covered by this morning's debate, we all have constituents who have gone through that. We know that it is not only a time of enormous uncertainty, but that there is often a vacuum of information. It is often difficult to get information on what is happening to a scheme and a pension, and scheme members read about it in the newspaper without hearing about it first-hand. 
 The amendments would impose a duty on trustees and managers to inform scheme members. We have used the identical phrase in each amendment which would insert in the various clauses an obligation on trustees and managers so that they 
''shall have a duty to inform the members of the scheme''.
 The circumstances in which they shall have that duty are different, which is why there are different amendments. 
 Amendment No. 256 applies to clause 94, which requires the insolvency practitioner to give notice to the board within the notification period, and would require the trustees, having been informed by the practitioner, to pass on that information to the scheme members. One hopes that good, conscientious trustees would let scheme members know that the company with which they have a scheme is entering insolvency. However, the amendment is merely a failsafe mechanism—a belt-and-braces approach—to ensure that they do that. 
 Clause 96, to which amendment No. 257 relates, requires an insolvency practitioner to issue a notice about whether a scheme rescue has occurred or is not possible. Again, there is an obligation to inform a number of people, including the board, the regulator, the trustees and managers of the scheme. Our amendment would put a subsequent obligation on the trustees and managers of that scheme to tell their members. 
 Amendment No. 258 applies to clause 97, which deals with an insolvency practitioner's failure to issue a required notice. The board will issue the notice that should have been issued by the insolvency practitioner to the trustees and the managers. The amendment would simply require the trustees and managers to inform scheme members in that circumstance. 
 Amendment No. 259 applies to clause 102, which relates to the board's duty when it receives an application from the trustees or managers of a scheme because the employer is no longer a going concern. It requires the board to confirm whether a scheme rescue is not possible or whether such a rescue has occurred. Again, scheme members should be kept informed in such circumstances. 
 Amendment No. 262 jumps way ahead to clause 117, which we may get to before Easter if we are very lucky. The clause deals with circumstances in which the board ceases to be involved with an eligible scheme. Again, scheme members should be informed in such circumstances. The principle of keeping people informed is pretty straightforward. 
 As I understand it, the point of the PPF is first and foremost to provide protection for pensions and to try to avoid the situation in which 60,000 or so people have lost part or all of their pensions. However, there is a secondary objective: to restore faith in occupational pensions. Part of that could be achieved by giving an assurance that scheme members would be more involved with and kept more informed about their occupational pension schemes. We have discussed other provisions—member-nominated trustees and so on—that would achieve that. It would be good to extend that principle to this part of the Bill so that as a scheme goes through the fairly traumatic process of being considered and examined by the PPF, the scheme members are kept fully informed. 
 I say ''fully informed'', but some of the information required would be fairly basic: whether a company has gone insolvent, whether there could be a rescue attempt or whether the PPF is still involved. One would hope that the trustees would keep scheme members informed in such circumstances. However, it is possible to imagine circumstances in which they would not. I am thinking of schemes that have been badly run by negligent people in which the trustees, managers and, perhaps, employers have had little or no concern for the scheme members. 
 After all, the PPF will deal with some of the worst managed schemes in the country. In such circumstances, the amendments provide a fall-back position that puts a duty on trustees and managers to 
 keep scheme members informed about one of the most important things in their lives: their pension.

Malcolm Wicks: Good afternoon, Mr. Cran. It is a pleasure to see you. Unlike my colleagues, I have curried favour with you; I hope that you will bear that welcome in mind if I stray.
 We are considering a small group of clauses concerned with the entry rules to the PPF. I hope that Committee members agree that it would be helpful if, in addressing the amendment, I set the scene for those clauses. 
 I rather agree with the hon. Gentleman's argument, but in my own way. I hope that he withdraws his amendment because it is unnecessary and his objectives will be met in another way. Those schemes with a pension promise and on which people set their hopes of receiving a set amount of retirement income will be eligible for PPF compensation. Therefore, all private sector-defined benefit schemes, including hybrid schemes that have an element of defined benefit provision, will pay the PPF levy, except those schemes that have a Government guarantee and those that are currently exempt from the applications of the minimum funding requirement and are also exempt from the new scheme's specific arrangements. The PPF is intended to protect members whose companies have gone bust, where schemes are left underfunded and the companies cannot pay members their promised pensions. 
 To qualify for PPF compensation, events along the following lines must occur. Entering formal insolvency or bankruptcy proceedings is classed as the qualifying insolvency event, which gets the PPF involved. That triggers the beginning of an assessment period in which the PPF considers whether a scheme rescue is possible, whereby another company takes over the insolvent firm and its pension scheme. The PPF also carries out a valuation of the scheme's assets. During that assessment period, members are paid scheme benefits equal to the compensation that would be payable by the PPF, so no one is left short of money in the meantime. 
 If a scheme rescue is possible, the scheme will be taken on by the new company and the PPF ceases involvement. If a scheme rescue is not possible and the scheme has enough assets to pay members at least a level of benefit that would be payable under the PPF, the PPF ceases involvement and the scheme will wind up in the normal way. Members will be refunded any difference between the benefit received during the assessment period and the pension that they should have received and will now receive according the original scheme rules. If a scheme rescue is not possible and a scheme does not have enough assets to pay members at least the level of benefit that would be payable by the PPF, the board will take over the scheme and members will continue to receive the PPF level of compensation. 
 As my right hon. Friend the Secretary of State made clear on Second Reading, given the time constraints it has been necessary to introduce some aspects of policy in Government amendments. I thank 
 hon. Members in advance for their patience. Similarly, greater precision on PPF design, such as the exact nature of entry rules, will appear in regulations. Again, I trust that our debate will prove constructive in developing that next tier of detail. 
 Needless to say, it is hugely important that no one is tempted to take advantage of the PPF so that its funding position is protected and people have confidence in the PPF guarantee. Several moral hazard provisions are already in the Bill. We have recently discussed the safeguards in the new scheme-specific funding, which aim to limit calls on the PPF as well as on the pension regulator, who will have close relations with the PPF and a commitment to protect it. Hon. Members should be aware that further measures to reinforce protection of the PPF will be introduced when we consider new clauses after Easter. 
 We are all agreed that protection needs to be introduced sooner rather than later, which is why we are working hard towards introducing the fund in the first part of 2005, subject to the will of Parliament. It is vital, however, that we do not run before we can walk and rush through the design stage in our haste to meet a set deadline. That is why, as we embark on making the PPF a reality, we are continuing to engage with experts, who have helped enormously from the outset, and it is why I look forward to the chance to explain further our decision making during the forthcoming discussions. Having set out the context, I shall deal with clause 94.

Nigel Waterson: The Minister said that we are all agreed on the timetable. I do not think that Opposition Members are agreed. Later, I shall explain why we think that commencement should be postponed until the risk-based levy is firmly in place, and why the Government should look much more closely at the interim measures that we debated this morning.

Malcolm Wicks: Indeed, we had a good debate this morning. There might be an opportunity to have the discussion that the hon. Gentleman wants later today or next week.
 Clause 94 sets out the insolvency practitioner's duty to issue to the PPF board, the pension's regulator and trustees or managers of the pension scheme notification of when a insolvency event occurs in relation to an employer. The occurrence of the insolvency event triggers the PPF's involvement in a scheme and marks the beginning of the assessment period, during which the PPF board will establish whether a scheme should come into the pension protection fund. The insolvency practitioner's role, both in notifying the PPF board, the regulator and scheme trustees or managers of the occurrence of the insolvency event, and in determining the scheme's eventual status, is crucial to the entry rules for the new fund. It is imperative that the insolvency practitioner's role is clearly set out in legislation, including details of the various bodies that should be notified of the insolvency event in relation to the sponsoring employer of a scheme and the time frame in which that should be done. 
 The amendment would require that trustees or managers of a scheme must copy certain notices received from the insolvency practitioner or the PPF board to members. Provision currently allows for those notices to be issued to the board, the regulator and the trustees or managers of the scheme. 
 As I told the hon. Member for Tatton (Mr. Osborne), I am sympathetic to his amendment's objectives. Indeed, similar amendments have been proposed to other parts of the Bill and I have replied in a similar way, because essentially they involved the same question. His proposal is not necessary because clause 165(1)(b), which deals with the provision of information to scheme members, ensures that regulations will require trustees or managers of a scheme to inform members of all appropriate information. That will include most notices, applications or determinations that relate to a scheme and its status as regards entry to the PPF. Thus the amendment would needlessly replicate existing provision. Perhaps the hon. Gentleman will withdraw it.

George Osborne: It is useful to have the Minister tell us what will be in the regulations, since we have not seen them, so the debate has been worth while. We take him at his word and that the regulations issued under clause 165 will require trustees and managers to keep scheme members fully informed.
 I have a final question for the Minister. Will the events prescribed by regulations under clause 165—detailing where scheme members will have to be contacted—cover all the amendments: the events under clause 94, which requires the insolvency practitioner to give notice to the PPF and the trustees; the events under clause 96, whereby the insolvency practitioner issues a notice; the event set out in clause 97, when the insolvency practitioner has failed to issue a notice and the board steps in to do that; the events under clause 102, when the board receives an application from trustees and managers; and, indeed, the events under clause 117, which details the circumstances in which the board ceases to be involved with the scheme?

Malcolm Wicks: Yes.

George Osborne: Good. That is the kind of crisp answer that one prays for in Parliament. In view of such a clear assurance that all the things that we were concerned about will be covered in regulation, and because we hope that scheme members' interests will be protected in the sense they will be kept fully informed of what is happening to their pension during what will inevitably be a period of great anxiety, I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 94 ordered to stand part of the Bill.

Clause 95 - Insolvency event, insolvency date and insolvency practitioner

Amendment made: No. 366, in 
clause 95, page 58, line 23, at end insert— 
 '( ) a meeting of creditors is held in relation to the company under section 95 of that Act (creditor's meeting which has the effect of converting a member' voluntary winding up into a creditors' voluntary winding up);'.—[Malcolm Wicks.]
 Clause 95, as amended, ordered to stand part of the Bill.

Clause 96 - Insolvency practitioner's duty to

Amendment made: No. 367, in 
clause 96, page 60, line 15, at end insert— 
 '( ) Regulations may require notices issued under this section— 
 (a) to be in a prescribed form; 
 (b) to contain prescribed information.'.—[Mr. Pond.]
 Question proposed, That the clause, as amended, stand part of the Bill.

Nigel Waterson: I have some unrelated points on the issues surrounding insolvency. The term ''issues surrounding'' is a phrase that we are not supposed to use any more because it irritates people. It certainly irritates me if somebody else uses it. Nevertheless, it is appropriate to raise such issues on this clause now.
 Scheme rescue is the main subject of the clause. The National Association of Pension Funds has flagged up a concern about the definition of a scheme rescue. The explanatory notes say that that 
''occurs when a solvency practitioner in relation to the employer is able to confirm the pension scheme has or has not been rescued and therefore will or will not enter the PPF.''
 That suggests that the PPF may not be called on despite the employer being insolvent. I am sure that that is not the intention, but it is worth getting the Under-Secretary to clarify it. 
 The NAPF is also concerned about how we define insolvency, which pertains to this clause and related clauses. The definition could go wider than what is meant by the word ''liquidation''. It says that as drafted 
''it appears possible that where a company voluntary arrangement is proposed, a cash-strapped employer with an underfunded scheme could dump it on the PPF but continue to trade, having cleared some of its non-pension debts. There needs to be greater clarity.''
 There is anecdotal evidence that a number of schemes are tottering on in the hope of being parked in the PPF once it is up and running, despite the challenging time scale for getting everything organised. 
 There is a third suggestion, which did not lend itself to an amendment. I am not convinced that it is fair to deal with it now, but the Under-Secretary may want to reflect on it and write to me. The British Chambers of Commerce says that it could be in the worst possible interests of scheme members for it to be wound up because the company has become insolvent 
''at a time when the assets are significantly below the level of liabilities.''
 It thinks that that could be temporary. I am sure that many companies that are not going bust also fervently hope that that is the case, despite the effects of FRS 17. 
 The British Chambers of Commerce wants a provision so that if there is a proposal to wind up a scheme, an application is first submitted to the regulator for authorisation so that he can examine the merits of the application. If the accrued liabilities exceed the current value of the assets by, say, more than 10 per cent., and if the regulator thinks that there is a reasonable chance that the scheme could meet a higher proportion of those liabilities by continuing as a closed scheme, he should be able to instruct the trustees to do just that. If they are not willing to continue the scheme on that basis, the regulator should have the power to employ an independent trustee company, which already happens in some circumstances, to act on the scheme's behalf. 
 Such a provision could help to rescue a scheme which was not in the most serious of difficulties. It could also reduce the cost to the PPF and, consequently, the levies proposed for other pension schemes as a result. The British Chambers of Commerce feels strongly about that and has more general reservations, and its idea is worth considering. Perhaps if the Under-Secretary has considered and discarded it, he might share his reasons for doing that with the Committee.

Chris Pond: The hon. Gentleman's first point, raised by the National Association of Pension Funds, relates to what scheme rescue is. It includes those situations in which the employer can emerge successfully from insolvency proceedings with a scheme intact, or when a purchaser of a business agrees to take over a scheme and protect members' benefits. If, however, the employer's business is to be sold on without the pension scheme being transferred, the pension liabilities will be left behind with the original employer, which is likely to be dissolved or to cease trading, with its creditors, including the pension scheme, paid out of any remaining assets. It will be clear in those circumstances that there is no employer to support the scheme in future and the scheme has not, therefore, been rescued.
 Creditors' voluntary liquidation allows an insolvent company to put itself into liquidation and wind up its affairs without the need for a court order. The distinction is between that and members' voluntary liquidation, which allows a solvent company to put itself into liquidation and to wind up its affairs—for example, when no one is left to run a family business. 
 In general, members' voluntary liquidations are not included as an insolvency event for the purposes of the PPF as they apply to a solvent form of company wind-up. For example, a company going into members' voluntary liquidation can make a statutory declaration that it will be able to pay all its debts in full, together with interest at the official rate, within a specified period not exceeding 12 months from the date of the commencement of the winding up. However, there are circumstances in which members' voluntary liquidation can be converted into a creditors' voluntary liquidation if it transpires that the debts cannot be paid in full within the specified period. Although clause 95 recognises CVLs—creditors' voluntary liquidations—triggered in the usual way, a 
 resolution is passed for a voluntary winding up of the company without a declaration of solvency. 
 The Government amendment will ensure that CVLs that occur as a result of a conversion from MVLs—creditors', as opposed to members', voluntary liquidations—are also covered. Members of such schemes are thus able to benefit from PPF protection. As for the hon. Gentleman's third point about the British Chambers of Commerce, I should like to take up his offer and reflect on what he said. We do not want to come up with an answer now that is not the Government's final settlement. Perhaps we can write to him and other members of the Committee about that. 
 Question put and agreed to. 
 Clause 96, as amended, ordered to stand part of the Bill.

Clause 97 - Board's duty where there is a failure to comply with section 96

Amendments made: No. 282, in 
clause 97, page 60, line 34, after 'or', insert 
 'a qualifying relevant event within the meaning'.
 No. 283, in 
clause 97, page 60, line 38, after second 'event', insert 
 'or, as the case may be, qualifying relevant event'.—[Mr. Pond.]
 Clause 97, as amended, ordered to stand part of the Bill.

Clause 98 - Eligible schemes

Nigel Waterson: I beg to move amendment No. 2, in
clause 98, page 61, line 9, leave out subsection (2).

James Cran: With this it will be convenient to discuss the following:
 Amendment No. 273, in 
clause 98, page 61, line 9, leave out 'not'.
 Amendment No. 274, in 
clause 98, page 61, line 9, after 'up', insert 
 'or if it has already been wound up.'.
 Amendment No. 276, in 
clause 136, page 83, line 46, at end insert— 
 '(2A) The regulations must prescribe that the initial levy is not to be used for payments under section 135(3) in so far as they relate to schemes which are being wound up or which have already been wound up on the date prescribed for the purposes of section 98(2).'.
 Amendment No. 277, in 
clause 137, page 85, line 11, at end insert— 
 '(11) Regulations must make provision that the pension protection levy is not to be used for payments under section 135(3) in so far as they relate to schemes which are being wound up or which have already been wound up on the date prescribed for the purposes of section 98(2).'.

Nigel Waterson: We are about to debate the point that we covered this morning, but we shall approach it from a different direction. Amendment No. 2 would remove subsection (2), which makes it clear that any schemes that are in wind-up before the Bill comes into
 force are not eligible. I do not want to rehearse our earlier arguments about the 60,000 people who need compensation and who will not be compensated under the Bill because its measures do not have a retrospective effect.
 However, the Committee would be surprised if I did not touch in passing on the slightly bizarre result of our Division this morning, whereby Labour Members voted down one of the amendments tabled by the hon. Member for Cardiff, West (Kevin Brennan), while he personally abstained. I hope—as I am sure the 60,000 people do—that that was on the basis that those 60,000 are on a promise that the Government will make some detailed proposals to deal with the problem soon. Tea and sympathy is wearing a bit thin, although at least we have avoided the old mantra about not raising false hopes.

Kevin Brennan: I abstained because the Government promised to continue considering the issue. I accept that the amendments that I tabled might not technically have achieved what we want to achieve. However, I note that for the first time, Conservative Members voted in favour of using public money to achieve such an end. Does the hon. Gentleman agree that public money should be used to compensate the workers? Is that now his party's policy, as Conservative Members voted for it this morning?

Nigel Waterson: It is said that attack is the best means of defence. The hon. Gentleman must make his own peace with those who inspired his amendments. As for his question, I thought I made my position crystal clear this morning. We are a responsible Opposition—I do not of course include the Liberal Democrats in that—so we will not sign a blank cheque. My position is that simple. However, we think that unclaimed assets provide the answer—[Interruption.] I am sorry that Labour Members find this so exciting. It was the hon. Member for Cardiff, West who took the view that he did not care where the money came from.
Kevin Brennan rose—

Malcolm Wicks: Will the hon. Member for Eastbourne give way?

Nigel Waterson: I will, after I have given way to the hon. Member for Cardiff, West, whose last intervention I am still trying to deal with. It is a luxury of sitting on the Back Benches not to care about where the money comes from. Those of us who sit on the Front Benches have to take a more responsible view, and my party's position could not be simpler. If the hon. Gentleman was reassured by the Government's wind-up speech this morning he is easily satisfied, because it seemed to me that they were still taking the view that they could not compensate people retrospectively; their thinking had not moved forward.

Kevin Brennan: I am happy to confirm to the hon. Gentleman that I stand by what I said: there should be compensation, and I do not mind whether it comes from public funds or another source. He is right to say that I am a Back Bencher—but he sits on the Front
 Bench and speaks on behalf of his party, and he led his troops to vote for the amendment that called for public funds to be used. I would have thought that that had some meaning in terms of the Conservative party's position. When he voted for that, did he mean it or not?

James Cran: Order. What we discussed this morning bears a certain resemblance to what we are discussing this afternoon, but I do not want a rerun of this morning's debate.

Nigel Waterson: I will deal quickly with the point that has just been made, and then if the Minister still wants to intervene I will give way.
 The hon. Member for Cardiff, West is mixing up two things, as did the Under-Secretary in his summing up this morning. One factor is giving the power to pay compensation to the 60,000 people, which the amendments of the hon. Member for Cardiff, West were primarily about; the other factor is where the money comes from. It is still firmly our position that it should come from unclaimed assets. The Under-Secretary signally failed to give any genuine justification of why, if unclaimed assets are now miraculously available to give to charities, at least some of them—we are talking about a sum that could amount to £15 billion—are not available for his constituents and those of other Members.

Malcolm Wicks: If the Opposition's contention is that the money should come from unclaimed assets—that is a reasonable proposal that can be, and has been, discussed—why did the hon. Gentleman vote this morning that it should come from the taxpayer? Has he discussed that with the Shadow Chancellor?

Nigel Waterson: I am sorry if the Minister has difficulty with our position. It would be infinitely more interesting to the Committee if he had a position on this matter, other than the tired mantra that the Government do not want to raise false hopes. I have made my position abundantly clear this morning, as did the hon. Member for Cardiff, West. I am only sorry that the vote was lost.

Paul Holmes: The hon. Gentleman spoke disparagingly about Members who offer tea and sympathy and then back away. Can he clarify what his party's position now is? Is he saying that, as in this morning's vote, he is in favour of providing assistance but only on condition that it comes from unclaimed or orphan assets? Is he therefore saying that if that route proves to be a dead end, all he will offer is tea and sympathy, because he would not provide the funding from any other source? I supported the private Member's Bill introduced by the right hon. Member for Birkenhead (Mr. Field) that would have gone down that route, but Government Whips blocked it.

Nigel Waterson: At the risk of testing your patience, Mr. Cran, let me again tell the Committee what I said this morning—and, perhaps more importantly, what I have consistently said to the various groups who have come to see me about the issue. We believe that the route advocated by the right hon. Member for Birkenhead is the right one, and certainly the one that we prefer. The Government have twice blocked
 the measures in the right hon. Gentleman's Bill, and only in the past few days has it become apparent that those unclaimed assets are indeed available. I have yet to get a straight answer as to why those assets are not available for the purposes that we propose.

Kevin Brennan: Will the hon. Gentleman give way?

Nigel Waterson: Let me just—

James Cran: Order. I am getting restless now. We are getting back to the debate that we had this morning. I want Mr. Waterson to address himself to the amendment. I do not want to hear justifications of who voted for what this morning.

Nigel Waterson: Pressing on, I shall adopt what I have just said as part of my recommendation for the amendment: our preferred solution is to use unclaimed assets. There now seems to be no practical bar to doing that—or if there is, I have yet to hear about it from the Government Front Bench.
 On amendment No. 2, as I said this morning in a different context, we will not sign a blank cheque for taxpayers' money. We cannot understand why the Government will not make a proper independent inquiry into the cost envisaged. We will make spending commitments when the need arises, but only when we know what they involve. It is as simple as that. [Interruption.] I understand the embarrassment of Government Members, but we should try to deal with amendment No. 2.

James Cran: Yes, I hope that we will.

Nigel Waterson: Schemes that are wound up before the Bill comes into force should also be eligible. As we have said, we will discuss later an amendment, or amendments, suggesting that until the risk-based levy is properly in place, we should postpone the start of the PPF. I imagine that when we get to that point, Ministers will criticise us and say, ''People need the PPF. They need the protection and confidence that it offers to pensioners and would-be pensioners.'' We do not disagree with that, but we commend to the Government the example of the Pensions Act 1995, and in particular the excellent speech made on its Second Reading by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), who was then the Minister responsible.
 My right hon. Friend made the point that in the face of the Maxwell crisis, the Government's immediate concern was not to rush to legislate, but to stabilise the short-term position. His Government had various imaginative ideas, not least the concept of the non-reimbursable loan from the Government. That somehow managed to get past the scrutiny of the Treasury, and enabled the people immediately faced with destitution to be looked after. That Government worked to a schedule that seems positively leisurely when compared with what this Government have in mind for the Bill; the 1995 Act was introduced and came into force a year or two later. 
 In this area of law, it is absolute madness for any Government to legislate in haste. The Government themselves have used the word ''challenging'' about the time scale for introducing the legislation, especially 
 the PPF, and that is, if anything, a massive understatement. We think, as the industry does—we will deal with that subject in more detail later—that it is asking for trouble to start off with a flat-rate levy rather than a proper risk-based levy. The Government would be much better advised to put off the implementation of the legislation. However, the other side of that coin is the need to tackle the interim situation. 
 We have been given a figure of 60,000 people; I hope that that number does not rise before April 2005, or whenever the legislation comes into force, but it may well do so. Every week of every month, smallish schemes get into such difficulties as we heard described this morning. Rather like the Government of the 1990s, this Government should be looking at the interim situation at least as seriously as the long-term situation, and should be making sure that they get that right, too. 
 We simply cannot understand why the Government are being so slow to consider options for dealing with the interim situation, and problems that have arisen, or might arise, before the legislation comes into force. If they have considered options, and are thinking very hard and carefully about them, why do they seem so unwilling to share them with the Committee? I suppose that they may have shared more with their Back Benchers, which may explain the slightly bizarre voting patterns this morning. 
 The Government's explanation for not addressing this issue is becoming threadbare. From their point of view, the way in which the Bill, which has many good things in it, is being overshadowed by the problems of the people who have lost out and who will continue to lose out when the legislation comes into effect, must be extremely annoying. I am trying not to repeat too much of this morning's debate, although all those arguments remain valid.

Bill Tynan: Is the hon. Gentleman saying that the official Opposition think that retrospection should be part of the Bill?

Nigel Waterson: It depends what the hon. Gentleman means by retrospection. I see the logic of the Government's position to the extent that it would be inappropriate to use the revenues and levies from the Bill to pay claims that have arisen in the past. That is why our preferred model, as set out in our amendments—the first to be tabled on the subject—is to have a separate interim pension protection fund, running in parallel to the PPF, which uses the unclaimed assets as a method of compensating people who have already lost out by the time the legislation comes into force. If that is what he means by retrospection, the answer is yes. If he means a simple retrospection that uses the PPF and its future levies for past claims, the answer is no.

Kevin Brennan: Amendments Nos. 273, 274, 276 and 277 relate back to, and are interlinked with, much of what we discussed this morning. I am trying to probe the Government's thinking and can suggest a possible way forward. I want to find out where the Government are going and when they will give us a
 definitive answer, which they have been unable to do so far, on how they will deal with the problem covered by my amendments.
 I want to give the Government the opportunity to respond to my amendments. It seems from the vote this morning and from what the hon. Member for Eastbourne just said that we have discovered why the Opposition voted for my suggestion of a possible way forward—namely, to use taxpayers' money to compensate schemes. They were in favour of it, not because that is their position, but because they want to cause embarrassment and to play a political game. I thought all parties had agreed that we would not act like that. I appeal to the Opposition to stop playing that game.

James Cran: Order. The Committee is doing exactly what I said it should not do. Mr. Brennan, I want you to speak to your amendments and to nothing else.

Kevin Brennan: I hear that loud and clear, Mr. Cran, and that is exactly what I will do.
 Amendment No. 273 refers to clause 98. It is a simple amendment that would leave out the word ''not''. That would bring schemes that have been wound up and schemes that are in the process of being wound up under the auspices of the PPF. Clause 98 defines the schemes that are eligible for assessment, that will be taken into the care of the pension protection fund and, ultimately, that will be bailed out by that fund. Under the clause as drafted, schemes in wind-up on the appointed day will be expressly excluded from the provision and therefore from the scope of the pension protection fund. The amendment would bring those schemes under its scope. 
 We can assume that, with the best will in the world, it takes years for any scheme to be wound up because of the complexity involved in identifying all its liabilities. The amendment would bring the schemes of companies that have gone bust in the past two or three years, but which are still in wind-up, under the scope of the PPF. That would include schemes in which the wind-up has not progressed far, such as the Allied Steel and Wire scheme in my constituency, and other schemes that concern hon. Members, such as the Kalamazoo scheme, for which the wind-up is nearly complete and annuities have been purchased. The amendment would not cover schemes that had completed winding up. 
 Amendment No. 258 would complete the job left undone by amendment No. 273 and bring in schemes that had already finished winding up—those in which annuities have been purchased and final accounts have been completed, and whose lights have been switched off.

James Cran: Order. The hon. Gentleman said amendment No. 258. Did he mean that? We are all confused.

Kevin Brennan: I beg your pardon, Mr. Cran. I meant amendment No. 274; my apologies for that slip of the tongue.
 No end date is specified in the amendment, which would bring schemes that were wound up many years ago into the scope of the pension protection fund. I anticipate that the Minister may have concerns about that. The only insolvent schemes that the amendment would not cover would be those in respect of which the last traceable beneficiary had died. 
 In fact, in the legal case pursued by Amicus and the Iron and Steel Trades Confederation, the legal obligation that they rely on refers to the EU insolvency directive, which only goes back as far as October 1983. During the course of our discussions, the only schemes that we have discovered that would be likely to be a great liability if compensation were to be introduced are those for which wind-up commenced after April 1997. As was mentioned earlier, the mass pension failures and difficulties that we have experienced are a relatively recent phenomenon. 
 Before that date, guaranteed minimum pensions could be brought back into the state earnings-related pension scheme without great difficulty, the cost being borne by the national insurance fund if the scheme could not afford to do so. The unmet benefits could only relate to pensions in excess of the guaranteed minimum pension, but that is still a substantial benefit, if smaller than complete compensation. 
 Finally, Mr. Cran—I will try to get the numbers right—amendments Nos. 276 and 277 relate to clauses 136 and 137 respectively. Amendment No. 276 would effectively ring-fence the levy to deal with the problem mentioned earlier. It would be incorrect for the levy to be used to compensate schemes that had gone bust before the Bill was introduced. 
 Had we passed the amendment on that subject this morning, the Secretary of State would have been permitted to contribute to a single pension protection fund, which otherwise would consist of funds raised only by the levy. As I said, some of my other amendments would bring past insolvencies within the scope of the pension protection fund and allow it to pay past claims. Amendment No. 276 would ring-fence the money raised by the levy so that it could not be used to meet claims in respect of schemes in wind-up on the appointed day or of those that had completed wind-up. 
 Amendment No. 277 would do the same in relation to the ongoing levy after the initial period. In other words, levy money could only be used for those schemes in wind-up after the Bill's introduction. I realise from the rejection of my amendments this morning that that would create the difficulty of how compensation could be paid if it did not come from the levy and if there were no public funds available to pay it.

Malcolm Wicks: The discussion has been useful and I thank my hon. Friend for his contribution. He has become a significant champion of this group of workers.
 Clause 98 defines those schemes that are not eligible to be taken over by the pension protection fund. Subsection (2) specifies that those schemes that are in the process of winding up immediately before an appointed day are ineligible for compensation. 
 Amendment No. 2 would enable members of schemes that are in the process of winding up before the introduction of the PPF to become eligible for compensation. That extension would effectively make the PPF retrospective. Therefore, the question of how that would be paid for arises, and that has been discussed. 
 Amendment No. 273 would do the same thing. Amendment No. 274 would, similarly, cover members of schemes that have completed wind-up before the introduction of the PPF. Those extensions would also effectively make the PPF retrospective. 
 Amendments Nos. 276 and 277 specify that the initial levy and the pension protection levy should be used only to compensate members of eligible schemes that commence wind-up after the introduction of the PPF. We cannot disagree with that because it supports our intention as set out in the Bill. However, I realise that amendments Nos. 276 and 277 were meant to be considered alongside amendments Nos. 273 and 274. Those amendments would make schemes that are in the process of winding up or have completed wind-up before the introduction of the PPF eligible for compensation. The effect of amendments Nos. 276 and 277, if taken with amendments Nos. 273 and 274, would merely leave open the source of funding for retrospective compensation payments. That would mean that the PPF would take on unknown and potentially very large liabilities without any obvious source of funding for the compensation. However, I acknowledge that there are good intentions behind the amendments. 
 My ministerial colleagues and I have spent a lot of time meeting hon. Members and scheme members to hear their concerns. We never refuse such requests and there are a couple of forthcoming meetings. It is worth noting that the Secretary of State has met workers from ASW, Dexion and UEF. I have met workers from Kalamazoo, Felix Schoeller and Dexion. My predecessor, my right hon. Friend the Member for Makerfield (Mr. McCartney), met workers from UEF, ASW, Astra Training Services and Ravenhead, and the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Liverpool, Garston (Maria Eagle), met workers from Famous Army Stores. We have also met concerned workers from solvent employers, including Parsons and Triplex. Therefore, we have had an opportunity to listen to and learn from those directly affected, and to try to explain the Government's position to them. 
 When I say that I sympathise with the people who will not receive the pensions that they were expecting, I, too, choke on the word ''sympathise'' because it is inadequate to express our feelings for those people. It is one thing to hear examples in Committee, but when we are face to face with them and hear what that means for their hopes and aspirations, and when they talk with what I would describe as quiet dignity about the impact on their health, welfare, and sometimes their marriages, the word ''sympathise'' does not begin to describe our feelings. We are examining closely all the suggestions that have been put to us, but given workers' anxieties, which we understand, we owe it to those affected to do so without raising expectations. 
 There are formidable difficulties involved in what hon. Members propose. As I said, retrospective cover would mean the fund taking on unknown and potentially very large liabilities. Such provision would also prove administratively difficult, if not impossible, to carry out for those schemes that have completed the wind-up process. With the prospect of guaranteed coverage for schemes that have not yet completed that process, some employers might seek to abandon their pension liabilities, thus further increasing costs on the new PPF. Such additional costs could threaten the viability of the fund. They would also be likely to place an unfair and disproportionate burden on levy payers. 
 Amendments Nos. 2 and 273 could also encourage schemes to slow down the winding-up process, in the knowledge that they would be covered by those provisions. Let me reassure hon. Members that the Government are sympathetic—to use that word again—to all those who will not receive the pension that they worked so hard to build up for their retirement. As my hon. Friend the Under-Secretary explained this morning, we are currently exploring with industry representatives a basis on which we can establish firm estimates of the extent of the problem of defined benefit schemes winding up under-funded. We are also assessing the numbers affected and the potential scale of losses. Once those data have been collated, my right hon. Friend the Secretary of State for Work and Pensions will be in a better position to report more fully the findings of our examinations and to suggest the appropriate course of action, if any. If I were a Back Bencher whose constituents had been affected, I too would be impatient to hear more, but that is as far as I can go today. 
 I understand the time scales involved, and that we have a duty to report to the House on this matter as soon as we have the information. That is our considered position. In asking the hon. Member for Eastbourne to consider withdrawing his amendment, I would say that it is better to have such a considered position than to be all over the place on the question of how we can deal with the issue of cost.

Nigel Waterson: I do not know who the Minister means when he talks about people being all over the place—

Malcolm Wicks: You.

Nigel Waterson: I thought as much. I notice that he singled out the hon. Member for Cardiff, West when he was talking about the good intentions behind amendments. The Minister should move on. I am sure that we all take what he says about sympathy at face value, as do the people affected. We have all, both Ministers and shadow Ministers alike, had those meetings, and there will no doubt be more, and more discussions on ways of dealing with the problem. I welcome the admission that the Government are to produce some hard figures. I do not want to understate the challenge, because the Opposition have tried to find ways of producing those, and it is quite a large task. The Government are the people to do it, and I am delighted that they now agree—I wonder why they
 have been so unwilling to admit that for so long. However, that does not deal with the question of how compensation will be structured once the figures are known.
 I am minded to withdraw amendment No. 2—on one simple condition. The Minister has told us that the Government are looking into the figures; as I have said, that is welcome. I will withdraw the amendment if he undertakes not to exclude—indeed, actively to consider—the use of unclaimed assets, now that the Chancellor in his Budget proposals has apparently swept away any practical problems. I am not asking the Minister to commit himself to that as the preferred option, but if he undertakes to ensure that that is one of the options that the Government will consider, I will happily seek to withdraw the amendment—although of course, hon. Members may not wish me to do so. Otherwise, I shall be minded to press amendment No. 2 to a vote. 
 The hon. Member for Cardiff, West seems to resent Committee members supporting his amendments, which could make for a rather unhappy Committee stage for him. I hope that that does not mean that he is pulling his punches. 
 As a former Back-Bench Member under a Conservative Government, perhaps I could give the hon. Gentleman a bit of advice: it is always as well to pin down one's ministerial colleagues pretty firmly before deciding not to pursue such amendments. In principle, we support his amendments in this group. I do not know about the procedure, Mr. Cran, but I should be grateful for your support and advice. If I do not get the reassurance for which I have asked the Minister—who is welcome to intervene at any point—to what extent could we engineer votes on amendments Nos. 273, 274, 276 and 277, as well as on amendment No. 2?

Malcolm Wicks: I do not want to strain this point, but the hon. Gentleman is calling for retrospection, and the issue of cost does arise. In view of the fact that he voted this morning to spend taxpayers' money, yet now seems to be talking about unclaimed assets, I must tell him that I can only give him an answer if I know what the question is.

Nigel Waterson: I thought that I had put it fairly simply. Let me try to put it in words of one syllable—or even less. [Interruption.] Sorry, I meant two syllables. I will seek the Committee's leave to withdraw the amendment if the Minister will give an undertaking not to exclude—and indeed, to consider as an option—the use of unclaimed assets to compensate the 60,000 people. I do not expect him to say that that would be the preferred solution, I merely ask him not to close his mind to it.

Malcolm Wicks: I cannot add greatly to what my hon. Friend and I have said already. We have given an undertaking that we will listen to and study all serious suggestions for a way forward.

Nigel Waterson: The problem with that is that it is inherent in the Minister's previous remarks that he does not regard that as a serious suggestion. If he
 accepts that it is, why can he not say, ''We'll take it away and look at it''? He could always come back and say, ''This is unmitigated rubbish—and we think that the Chancellor has got it wrong as well, because it does not work.'' In that case, I would happily withdraw the amendment. Apparently we are not going to get to that point, so I shall not seek leave to withdraw the amendment.
 Question put, That the amendment be made:—
The Committee divided: Ayes 4, Noes 12.

Question accordingly negatived.

Nigel Waterson: On a point of order, Mr. Cran, I am sure that I distinctly heard the hon. Member for Ealing, Southall (Mr. Khabra) say ''Aye''. Perhaps he wanted to correct his vote, but he did not try to do so before Division was concluded.

James Cran: Mr. Khabra, will you clarify that?

Piara S Khabra: I said, ''No.''

Nigel Waterson: May I repeat my request that having lost that vote, we should be able to vote on one of the amendments tabled by the hon. Member for Cardiff, West?

James Cran: Do you want to move any of your amendments formally, Mr. Brennan?

Kevin Brennan: May I speak to them, Mr. Cran?

James Cran: No, we have had the debate. Do you wish to move an amendment formally or not?

Kevin Brennan: No, I do not.
 Clause 98 ordered to stand part of the Bill.

Clause 99 - Duty to assume responsibility for

John Robertson: I beg to move amendment No. 416, in
clause 99, page 61, line 14, leave out from 'where' to end of line 15 and insert— 
 '(a) a qualifying insolvency event has occurred in relation to the employer in relation to an eligible scheme; or 
 (b) such an event would have occurred but for an agreement reached by the trustees or managers of the scheme and the employer in order to avoid a qualifying insolvency occurring.'.
 Under the present proposal, the PPF will be able to help only where employers are insolvent. The amendment addresses the situation when trustees reach an agreement with the employer to waive a debt owed to them. The employer, unable to fund the pension scheme, puts forward a proposal whereby the 
 scheme will wind up in deficit. Ordinarily that would trigger the obligation on the part of the employer to make up the deficit, under section 75 of the Pensions Act 1995. Unfortunately, in such a case the employer cannot afford to do that. Under the agreement that he reaches with the trustees, that debt is waived in whole or in part, the scheme winds up with an unmet deficit, and benefits are cut. However, waiving the debt means that the employer is safe and no insolvency proceedings are required. 
 That situation looks similar to the one that the PPF is meant to deal with. However, it is not covered by the Bill. To fall within clause 99, which requires the PPF to take responsibility for the scheme, the employer must be insolvent. To fall within clause 101, which enables trustees to call on the PPF, the trustees must be satisfied that the employer is unable to meet its debts. Arguably the trustees could refer the scheme to the board under clause 101, but I will explain in a moment why I do not think that that would happen. 
 The amendment would bring those compromises within the scope of clause 99, and would require the PPF to assume responsibility for the scheme where a compromise had been agreed, whether or not the trustees saw fit to refer the scheme to the board. The main purpose of the amendment is retrospection. Amendments were tabled to clause 98 so that the PPF would cover a scheme that had already been wound up. Unfortunately, they were not accepted. 
 However, where the trustees have agreed the compromise and the situation is favourable schemes fall within the definition of ''eligible scheme'', because once the compromise is agreed, the scheme inevitably winds up. However, it will still not be covered by the PPF, because clause 99 requires an insolvency event. Clause 101 cannot apply because there is no question of the employer being unable to pay its debts. The amendment would bring such schemes within clause 99, so that the PPF would have to take responsibility for a scheme for which a compromise had been agreed and the scheme had been wound up in deficit. The unmet benefits would fall to be restored under clause 128. 
 An example of such a case is Triplex, where a debt of £18 million was compromised at £500,000. After the PPF is in place, trustees might not be prepared to make a compromise agreement such as that. Instead they might push companies into insolvency, and that could lead to an avoidable loss of jobs. I ask the Minister to address those probing questions. Without doubt, at the end of the day our aim is to try to keep people in employment, and not to force companies into insolvency.

Malcolm Wicks: The amendment raises one of the more complex issues in a difficult field. I understand the points that my hon. Friend has made. Clause 99 details the board's duty to assume responsibility for schemes following an insolvency event occurring in relation to their sponsoring employer. The amendment would mean that if the trustees of a scheme with a solvent employer had reached a compromise agreement with that employer to accept a lower amount than was due to the scheme on wind-up, the scheme could still be covered by the PPF. Such an
 agreement would occur where the employer was experiencing such financial difficulties that he was on the verge of insolvency, and the debt that the employer would owe to the scheme could not be paid in full.
 The trustees might also find that the effect of such a compromise agreement was that the amount that the scheme received from the solvent employer was higher than it would have received if the employer had gone into insolvency. In that situation, the compromise should result in the employer avoiding insolvency and the scheme receiving more funds than it would otherwise have done. 
 Compromise agreements should be made with great care, and only after careful consideration of all relevant information. As hon. Members are aware, scheme trustees have a fiduciary duty to act in the interests of all scheme members and beneficiaries at all times. Also, trustees are answerable via the courts if they breach those responsibilities. Trustees should believe that they have taken the best decision available to them having taken account of the position of their scheme. 
 The amendment would allow schemes, on which a compromise agreement had been reached with the sponsoring employer in order to avoid insolvency, to enter the PPF. Although I have sympathy for the underlying spirit of the amendment, it could lead to abuse and ultimately jeopardise the existence of the PPF. With such a change, trustees and employers may be motivated to reach compromises so that the scheme can enter the PPF and the employer can continue as a going concern. Trustees may be tempted to accept a compromise agreement that offered the scheme low amounts of money on the basis that the scheme would still be able to enter the PPF and pensions would be looked after. That would be likely to have a significant impact on the PPF's funding, and PPF would not be able to claim all of the funds to which it was entitled. To meet the corresponding increase in its liabilities, it may also have to increase the levy substantially. 
 Ultimately, the impact of such an approach could be to affect the continued existence of the PPF. The avenue that the amendment provides could prove attractive to the unscrupulous employer. He could pay his final salary scheme a few pennies and dump his pension liabilities on the PPF. That may also provide him with competitive advantages over more principled employers. 
 As I have suggested, I find this issue difficult. I learned a lot about it when I met members affected at Triplex, which the hon. Gentleman mentioned. Trustees who are considering a compromise agreement in good faith must weigh the need for the firm to continue and for safeguarding jobs against the rights of all pension scheme members, but especially those close to retirement age. That is a genuine dilemma for trustees.

Bill Tynan: I understand the argument that the amendment could force a bad employer to wind up a scheme or ask the trustees to wind it up. However, a scheme could be in difficulty because there is no funding, and, if the employer does not wind up the
 scheme, his only other choice would be to close down the business. Under those circumstances, the members of that scheme would benefit from the PPF because the company would be insolvent. The amendment is an attempt to keep jobs and ensure that the company remains if pension schemes agreements are made similar to those of Bradstock. Will the Minister examine the proposition closely and consider what we can do under the circumstances of compromise agreements? I understand that this is a complex issue, but it is important that decisions are taken in the best interests of scheme members and employers.

Malcolm Wicks: My hon. Friend has made the point well, as did my hon. Friend the Member for Glasgow, Anniesland (John Robertson). I said that I would find such matters difficult. It is a genuine dilemma. However, as I have emphasised, there is a real danger of what people would call moral hazard. Why should an employer put more into a pension fund if he or she knows that the PPF will ride to the rescue? It is a difficult one in terms of perverse incentives. When I spoke to the Triplex workers, I gained a better understanding of the difficulty. I shall ask my hon. Friend the Member for Glasgow, Anniesland to withdraw his amendment. However, the Department and I want to reflect further on the matter. I mean that sincerely, but I will do so without obligation. The problem is difficult and it requires some further thought. I thank my two hon. Friends for their contributions to the debate on such an important matter.

John Robertson: I listened to the Minister and my hon. Friend and I shall reflect on what he said. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn.

Malcolm Wicks: I beg to move amendment No. 368, in
clause 99, page 61, line 26, at end insert— 
 '(2A) For the purposes of this section, in relation to an eligible scheme an insolvency event (''the current event'') in relation to the employer is a qualifying insolvency event if— 
 (a) it occurs on or after the day appointed under section 98(2), 
 (b) it— 
 (i) is the first insolvency event to occur in relation to the employer on or after that day, or 
 (ii) does not occur within an assessment period (see section 104) in relation to the scheme which began before the occurrence of the current event, and 
 (c) it does not occur in such circumstances as may be prescribed.'.

James Cran: With this it will be convenient to discuss Government amendments Nos. 369, 374 and 391.

Malcolm Wicks: Amendments Nos. 368 and 369 would amend clause 99. They are grouped with amendments Nos. 374 and 391, which would make consequential changes to clauses 104 and 144. The clause sets out the criteria that must be satisfied before the board can assume responsibility for a scheme when an insolvency event has occurred.
 Amendment No. 368 would add further provision, setting out that any insolvency event that occurs in relation to the scheme is only a qualifying event for the purpose of entry to the PPF if it occurs after the day that the PPF starts operating which, subject to Parliament, is planned for April 2005 and defined under clause 98 as the ''appointed day''. Clause 98 makes it clear that any scheme that commences winding up prior to the appointed day will not be covered by the PPF. The amendment further ensures that scheme trustees will not be able to manipulate their situation in the run up to the PPF to gain entry. Without the amendment, a company could go bust today, but if the trustees could prevaricate for long enough and delay commencing winding up the pension scheme, the PPF could be liable to pay compensation. 
 The amendment also includes a power to prescribe further circumstances in which an insolvency event would not be classed as qualifying for the purposes of the fund. That power will protect the PPF and levy payers from employers who can manipulate the insolvency proceedings as a way of letting their pension scheme fall into the PPF when it is up and running.

George Osborne: I understand that the Minister is trying to protect the PPF from inheriting many insolvencies, but the counterpoint to his argument is that some workers will not have protection in the absence of a retrospective scheme because the insolvency people could not prevaricate. Does he have an idea of how many people during the next year that could affect? If we did not accept the amendment, a company could hold out and people could receive some compensation by entering into the scope of the PPF.

Malcolm Wicks: No, I do not, but there will be some people.
 I shall continue my explanation. An insolvency event, as defined under clause 95, could occur after the appointed day but in fact be a stage in an ongoing insolvency proceeding that started prior to the introduction of the PPF. For example, a company could go into administration today but hold off its liquidation until after the PPF goes live—hopefully, in the spring of next year. 
 As responsible businesses and employers gear themselves up to pay the levy from next year, we must do all we can to protect the PPF and those levy payers from moral hazard and from employers and trustees who would seek to bend the rules, undermining a principle at the core of the PPF. In that respect, the PPF is like an insurance scheme. People cannot get the payout if they have not paid the premium. I should add that without the amendment the line on retrospection would be blurred, and members of schemes facing difficulties now would face a lottery as to whether they might potentially be able to enter the PPF entirely independent of whether their scheme trustees or managers might be able to manipulate the rules surrounding winding up. 
 Amendment No. 374 makes a consequential change to clause 104 to ensure that the definition of a qualifying insolvency event is consistent with the 
 provisions relating to the assessment period. Amendment No. 391 has the same effect on clause 144, which relates to fraud compensation. I urge hon. Members to agree the amendment. 
 Amendment agreed to. 
 Amendment made: No. 369, in 
clause 99, page 61, line 28, leave out paragraph (a).—[Malcolm Wicks.]
 Clause 99, as amended, ordered to stand part of the Bill.

Clause 100 - Duty to assume

Question proposed, That the clause stand part of the Bill.

Malcolm Wicks: It might be useful if I described, albeit briefly, the purpose of the clause. It provides the PPF with the power to assume responsibility for certain schemes where there has not been an insolvency event as defined by clause 95—for example, public sector schemes without a Crown guarantee and schemes with employers based overseas and subject to foreign insolvency proceedings. We are totally committed to providing protection for the members of such eligible schemes who will be liable to pay the PPF levy. We need to ensure that the legislation provides for eligible schemes whose sponsoring employers cannot meet the insolvency events test to enable them to benefit from PPF compensation. The clause makes provisions to protect their members, because we recognise that such schemes may also face risk in future.

George Osborne: The Minister mentioned in passing public sector schemes that did not have a Crown guarantee. Could he give the Committee some examples of such schemes? Presumably they will be paying the levy.

Malcolm Wicks: Yes.

George Osborne: Given that they are public sector schemes, what would be the burden and will the costs of the levy be borne by the taxpayer?

Malcolm Wicks: We are talking about prime examples of all non-departmental public bodies whose employers are not members of the civil service pension scheme. They will pay the levy and will be able to benefit from the PPF in such adverse circumstances.

George Osborne: Will the Minister give way?

Malcolm Wicks: May I give some examples? I am talking about—[Interruption.] I did not hear that. No doubt the hon. Member for Eastbourne could stand up and say that. In giving examples, I do not want to frighten workers in those bodies by saying that they are on the verge of bankruptcy. Examples would include, inter alia, the Arts Council, the British Tourist Authority and the Medical Research Council.
Several hon. Members rose—

Malcolm Wicks: I give way.

James Cran: Let us take a decision. Who are you giving way to, Mr. Wicks?

Malcolm Wicks: I give way to the hon. Member for Tatton.

George Osborne: There may be quite a large number of such bodies. We want to provide their scheme members with protection—I am not suggesting that we do not. However, I am not sure whether the Minister dealt with the second part of my intervention. Will the cost be borne by the taxpayer, presumably because most of these bodies receive grants from Whitehall Departments, or by the levies and charges on some of those bodies? Is there any idea of cost? I am not sure that I saw anything in the regulatory impact assessment about the ultimate cost to the taxpayer of what could be a significant bill if all the non-departmental public bodies were not paying this levy.

Malcolm Wicks: From memory, after the initial year with the flat-rate levy, we are talking about £20 on average per scheme member. That is a general PPF estimate, without taking account of the risk-based levy. The amount of money would be of that order; I am not saying that it is insignificant, but it would not represent a significant burden on those bodies.
 I think that the hon. Gentleman is trying to persuade me to say that, given that many such bodies are funded by the Exchequer, there is an implication for the taxpayer. Yes, there is such an implication. However, it is for the bodies to determine how they would afford the levy, which would give them important protection.

Nigel Waterson: I have had a slightly surreal thought, which the Minister may be able to confirm. Presumably, the PPF staff's pension fund might well be included among those of the non-departmental public bodies.

Malcolm Wicks: No, because those staff will be counted as civil servants. They will be in final salary schemes, but counted as civil servants. I recognise the hon. Gentleman's line of questioning, but it seems to me that the Arts Council could arrange some glorious spectacular of modern ballet and rock music to pay the levy.

George Osborne: I was not planning to speak on the clause. We are being asked to agree to something, but the Minister has given no clear indication of the scale of the impact that it would have on the Exchequer. We do not know whether this will cost the taxpayer a million pounds, or more. The Minister said in a jokey way that the Arts Council could organise a rock ballet to pay for it.
 All the bodies will be faced with additional cost. All that I ask of the Minister is that he should give some idea that the Government know the cost that they are imposing on themselves, or rather on the non-departmental bodies that they work with. Perhaps he would write to me and other Committee members about that. What will be the cost to all the bodies paying the levy that fall within the broad ambit of the public sector? That seems a perfectly reasonable 
 question. I am not against the levy, and I am not trying to be critical. I would just like to know the facts—what the burden on the taxpayer will be.

Malcolm Wicks: It will be up to the bodies for which we are legislating to determine the nature of the levy for these institutions; my guess would be that for many of them, the risk-based element would be nothing or very low. We are not talking about a large sum of money. There are not large numbers of such organisations with large staff memberships. However, if I can help the hon. Gentleman with some arithmetic on the matter, I will do so by letter, and I will copy that to other Committee members.
 I am slightly confused about whether we should take seriously the big spender assumptions of the Opposition in terms of retrospection, or their minute concern about the arithmetic as it affects the bodies. Which is it to be?

George Osborne: The Minister has attempted to taunt us all day by asking, ''Where is the money coming from?'' It is perfectly reasonable in discussing this clause to ask where the money is coming from and how much money will be involved.

Malcolm Wicks: I have said that I will send the hon. Gentleman the best estimates that I can get. As a polite response, perhaps he and his colleagues would write to me about how they propose to fund their ideas—that would be a good quid pro quo, as we say in Croydon.
 Question put and agreed to. 
 Clause 100 ordered to stand part of the Bill.

Clause 101 - Applications and notifications

Amendments made: No. 370, in 
clause 101, page 62, leave out lines 34 to 36 and insert— 
 '(1) Where the trustees or managers of an eligible scheme become aware that—'
 No. 371, in 
clause 101, page 62, line 39, at end insert— 
 'they must make an application to the Board for it to assume responsibility for the scheme under section 100.'.
 No. 372, in 
clause 101, page 63, line 9, at end insert— 
 '( ) The duty imposed by subsection (1) does not apply where the trustees or managers of an eligible scheme become aware as mentioned in that subsection by reason of a notice given to them under subsection (5). 
 ( ) The duty imposed by subsection (4) does not apply where the Regulator becomes aware as mentioned in that subsection by reason of a copy of an application made by the trustees or managers of the eligible scheme in question given to the Regulator under subsection (2).'—[Malcolm Wicks.]
 Question proposed, That the clause, as amended, stand part of the Bill.

Nigel Waterson: I feel that we have reached a milestone. We have now passed the 100-clause mark—that is, on one view, at least; we keep leaping
 about the Bill, so perhaps it is not so much of a milestone after all.
 People in the industry have raised a couple of points with me about subsection (1), which imposes an obligation on trustees to apply to the board, so that it can 
''assume responsibility for a scheme . . . if it appears to''
 the trustees that the employer 
''is unlikely to continue as a going concern''.
 That is a pretty imprecise phrase, and I do not recognise it as a legal term of art. If we are imposing obligations on trustees in the clause, as we are in various parts of the Bill, we should be pretty clear about what that obligation is. It seems that trustees, who may have no real internal knowledge at all about the employer, its business or its finances, will have to make a subjective judgment. Is it fair to impose such an obligation, rather than simply giving trustees the power to make an application, so that they have the option, but not necessarily an obligation? 
 That unease is also reflected in the views of the National Association of Pension Funds. It suggests that trustees get guidance from the regulator on how to discharge their responsibilities. There are two ways of approaching the problem, but we definitely believe that there is a problem.

Malcolm Wicks: In the light of that line of questioning, it would be helpful if I explained that clause 101 relates to a scheme that is not subject to insolvency events, but for the great number there is an insolvency event and a clear trigger. The clause provides for the trustees or managers of an eligible scheme, the employer of which is not subject to insolvency events as defined in UK legislation, to apply to the PPF for the board to assume responsibility for the scheme. Examples include some public sector schemes without a Crown guarantee, or schemes with a foreign sponsoring employer.
 Equally, the clause provides that, where the regulator becomes aware that the sponsoring employer of such a scheme is unlikely to continue as a going concern, it must notify the board. The PPF is keen to ensure consistency in the process of triggering its involvement with eligible schemes. We recognise that some employers will not be covered by the insolvency events as listed in clause 95, and we have therefore made provisions to cover those schemes. We are keen to ensure that legislation captures all eligible schemes whose employers will have been required to pay the PPF levy, and that those members are therefore protected by the PPF. I hope that that satisfies the hon. Gentleman as to the type of schemes—they are in the minority—that could be subject to the PPF and that do not have the formal trigger of the so-called insolvency event. 
 Question put and agreed to. 
 Clause 101, as amended, ordered to stand part of the Bill. 
 Clause 102 ordered to stand part of the Bill.

Clause 103 - Protected liabilities

Amendment made: No. 373, in 
clause 103, page 64, line 9, after 'which', insert 'the time immediately after'.—[Malcolm Wicks.]
 Clause 103, as amended, ordered to stand part of the Bill.

Clause 104 - Assessment periods

Chris Pond: I beg to move amendment No. 441, in
clause 104, page 64, line 23, leave out sub-paragraph (iii) and insert— 
 '(iii) the conditions in section 119(2) (no scheme rescue but sufficient assets to meet protected liabilities etc) are satisfied in relation to the scheme,'.

James Cran: With this it will be convenient to discuss the following:
 Government amendments Nos. 443, 445 and 446, 453 and 454, 460 to 469, 471, and 473 to 475. 
 Government new clause 10—Schemes required to wind up but unable to buy out liabilities. 
 Government new clause 11—Treatment of closed schemes required to wind up. 
 Government new clause 12—Valuations of closed schemes. 
 Government new clause 13—Applications and notifications where closed schemes have insufficient assets. 
 Government new clause 14—Duty to assume responsibility for closed schemes. 
 Government new clause 15—Closed schemes: further assessment periods.

Chris Pond: This is a large group of amendments and new clauses, which adds a significant and crucial extra limb to the process that determines whether a scheme can enter the PPF. I apologise to the Committee that we were unable to table these amendments and new clauses earlier. I hope that the notes on them that we have circulated to Members are helpful in explaining their purposes. I will try briefly to explain their background, purpose and provisions in some detail.
 As drafted, the Bill provides that, following a valuation under clause 112, if a scheme with an insolvent employer, and no hope of scheme rescue, is found to have sufficient assets to buy out benefits at above the level of the protected liabilities, it will not enter the PPF and the trustees of the scheme will be required, under clause 119, to wind up the scheme and secure members' benefits in accordance with the priority rules. Schemes would secure members' benefits by purchasing annuities for pensioner members and deferred annuities from insurance companies for actives and deferred members. 
 However, the Bill as drafted does not cater for the situation where scheme trustees cannot obtain a protected benefits quotation. That could occur in relation to very large pension schemes, where the insurance market at present appears to have insufficient capacity to absorb the pension liabilities 
 of a large scheme on a buy-out basis. The bulk annuity buy-out market expands and contracts depending on both the availability of gilt-edged stock needed to underwrite the contracts and the willingness of the few life offices currently in the market to take on business. The market is such that currently we estimate that pension funds worth anything over £500 million could find that they are unable to obtain a buy-out quotation as required by clause 119. 
 However, it is important to recognise throughout our consideration of these amendments that such a situation depends on both the sponsoring employer of a large scheme becoming insolvent and a PPF valuation showing that the scheme's assets are sufficient for it to buy out benefits above the level of the protected liabilities. It is also important to recognise that in the UK no scheme of this size has ever suffered the double whammy of underfunding and insolvency of the sponsoring employer.

Nigel Waterson: Does the Under-Secretary have any idea how many funds are worth over £500 million?

Chris Pond: There are very few, and that is one reason why this is a bit of a belt and braces approach. We want to ensure that we cover all eventualities; it is prudent to do so in order to protect the PPF from these unusual circumstances if they were ever to arise. Perhaps I can give a detailed response to the hon. Gentleman's question in writing.
 The events that these detailed Government amendments and new clauses address are unlikely to occur. Were they to do so without the protection provided by the amendments and new clauses, there is a danger that they could impose a heavy burden or place a considerable risk on the PPF.

Nigel Waterson: I thank the Under-Secretary, and through him his officials, for producing the notes. I only hope that they keep pace with the torrent of new Government amendments, as that would save us time.
 I have a couple of questions that arise out of what the Under-Secretary said and what is in one helpful note. It is a shame that we have not adopted the American system in which the notes become part of the record, but the Under-Secretary must make his points, and we must make ours. 
 I think the Under-Secretary is saying that, on current depressed values, we are talking about a rare combination of circumstances that will affect only a tiny number of schemes, and I accept that. Despite the apparent complexity of the long list of amendments and new clauses, that seems to be the right approach to the closed-scheme problem. 
 I have two other points to make. As the notes say, the schemes 
''represent a significant potential moral hazard risk to the PPF'',
 but the moral hazard argument goes beyond those particular, rare circumstances. A great debate has been going on for years, and is still going on in America, about whether such a scheme produces the perverse incentives to which the Under-Secretary referred. Industry is concerned that there will be a substantial moral hazard problem. As long as everybody knows 
 that there is a safety net, people may not be so careful about how they run their schemes. We shall return to that issue to consider it in more detail. 
 There is one other point in the notes that was not clear to me. They say: 
''In order to protect the PPF against moral hazard, such schemes will be subject to increased supervisory requirements and will only be able to pay out benefits in line with the statutory priority order (to be introduced when new clauses are considered after Easter).''
 I was under the impression that that was a matter for a separate statutory instrument, which is hanging around waiting to be considered in Committee. Is it being suggested that a different priority order applies to these schemes, or will that be dealt with as part of the Bill?

Chris Pond: It is important for hon. Members to recognise that the enhanced scrutiny by the regulator is an important part of our measures to prevent the moral hazard to which the hon. Gentleman refers.
 Our proposals for the priority order, which we hope to introduce to the Committee as soon as possible after Easter, will be part of the Bill. We will have an opportunity to consider that in this Committee. 
 Amendment agreed to. 
 Amendments made: No. 374, in 
clause 104, page 64, line 25, leave out subsection (3) and insert— 
 '(3) In subsection (2) ''qualifying insolvency event'' has the meaning given by section 99(2A).'
 No. 443, in 
clause 104, page 64, line 37, leave out sub-paragraph (iii) and insert— 
 '(iii) the conditions in section 119(2) (no scheme rescue but sufficient assets to meet protected liabilities etc) are satisfied in relation to the scheme,'.
 No. 375, in 
clause 104, page 64, line 40, leave out 'section 127(5)(a)' and insert 'section 101(5)(a)'.
 No. 444, in 
clause 104, page 64, line 41, leave out 'respect of' and insert 'relation to'.
 No. 445, in 
clause 104, page 64, line 42, at end insert— 
 '( ) This section is subject to section [closed schemes: further assessment periods] (which provides for further assessment periods to begin in certain circumstances where schemes are required to wind up or continue winding up under section 119).'.—[Mr. Pond.]
 Clause 104, as amended, ordered to stand part of the Bill.

Clause 105 - Admission of new members,

Amendment made: No. 376, in 
clause 105, page 65, line 6, at beginning of line insert 
 'Except in prescribed circumstances and subject to prescribed conditions,'.—[Mr. Pond.]

Chris Pond: I beg to move amendment No. 377, in
clause 105, page 65, line 14, leave out subsection (5).

James Cran: With this it will be convenient to discuss Government amendments Nos. 379 and 385.

Chris Pond: The purpose of the amendment is simply to ensure that all elements of the legislation are clear and watertight.
 Amendment agreed to. 
 Question proposed, That the clause, as amended, stand part of the Bill.

Nigel Waterson: It might be my fault, but have we gone past amendment No. 408?

James Cran: Amendment No. 408 was due to be considered with amendment No. 376, but that was not discussed. It was for the hon. Gentleman to catch my eye at that point if he so wished, and he did not do so.

Nigel Waterson: I apologise for missing amendment No. 408, but I want to make the substantive point during the clause stand part debate.
 Clause 105 in effect freezes a scheme during the assessment period. Subsection (3) states: 
''No further contributions . . . may be paid''.
 However, it should be made clear that that would not prevent a statutory debt being payable to the trustees. If the Under-Secretary thinks that the Bill is clear, no doubt he will explain why. Alternatively, he might think that that needs to be dealt with, if not now perhaps later on. 
 Question put and agreed to. 
 Clause 105, as amended, ordered to stand part of the Bill. 
 Clause 106 ordered to stand part of the Bill.

Clause 107 - Restrictions on winding up of schemes

Amendments made: No. 378, in 
clause 107, page 66, line 20, leave out from 'scheme' to 'an' in line 21 and insert 'in pursuance of'.
 No. 379, in 
clause 107, page 66, line 25, leave out subsection (4) and insert— 
 '(4) During the assessment period— 
 (a) except in prescribed circumstances and subject to prescribed conditions, no transfers of, or transfer payments in respect of, any member's rights under the scheme are to be made from the scheme, and 
 (b) no other steps may be taken to discharge any liability of the scheme to or in respect of a member of the scheme in respect of pensions or other benefits. 
 This subsection applies whether or not the scheme was being wound up immediately before the assessment period or began winding up by virtue of subsection (3).'.
 No. 446, in 
clause 107, page 66, line 37, leave out subsection (8).—[Mr. Pond.]
 Clause 107, as amended, ordered to stand part of the Bill.

Clause 108 - Power to validate

Amendments made: No. 447, in 
clause 108, page 67, line 4, leave out 
 'give a notice to that effect' 
 and insert 
 'issue a notice to that effect and give a copy of that notice'.
 No. 448, in 
clause 108, page 67, line 13, leave out from beginning to 'an' and insert 'The validation of'.
 No. 449, in 
clause 108, page 67, leave out lines 14 and 15 and insert— 
 '(a) until— 
 (i) the Board has issued a notice under subsection (2) relating to the determination, and 
 (ii) the period within which the issue of that notice may be reviewed by virtue of Chapter 6 has expired, and'.
 No. 450, in 
clause 108, page 67, line 16, leave out 'determination' and insert 'issue of the notice'.
 No. 451, in 
clause 108, page 67, line 19, leave out 'determination' and insert 'issue of the notice'.—[Mr. Pond.]
 Clause 108, as amended, ordered to stand part of the Bill.

Clause 109 - Board to act as creditor of the employer

Question proposed, That the clause stand part of the Bill.

Nigel Waterson: I have a small point to make, which has been raised by experts in the industry. Clause 109(2) provides that
''During the assessment period, the rights and powers of the trustees . . . in relation to any debt'',
 including a statutory debt, 
''are exercisable by the Board''.
 I suppose it can be argued that it is implied that that will not be exercisable by the trustees. However, there is a feeling that it should be clear in the Bill that the board will have the same powers as the trustees to enter into what is called in the trade a Bradstock compromise. I should be grateful if the Under-Secretary clarifies that.

Chris Pond: I do not want to be discourteous to the hon. Gentleman and hope that it is not out of order for me to deal with something that he raised earlier. We are moving at such a pace that although he asked about a question relating to amendment No. 408, he received no reply. I should say that Government amendment No. 376, which has been made, has the effect that he wanted. I hope that he is satisfied with that answer. I apologise for any apparent discourtesy.
 As the hon. Gentleman said, clause 109 provides for any debt owed by the employer to the trustees or managers of a scheme to be regarded as a debt owed to the board and for the board, in this case, to be treated as a creditor of the employer during the assessment period. The purpose of that is to ensure that PPF can prevent trustees or managers from compromising the debt in any way and, therefore, increasing the liability of the PPF. The board can, if it so wishes, exercise the powers of the trustees or managers of the scheme in relation to any debt owed to them by the employer, 
 whether by virtue of section 75 of the Pensions Act 1995, or otherwise. That can be done to the exclusion of trustees. The board can, in such circumstances, use those powers to protect the position of scheme members and the PPF. 
 Clause 109 includes the ability to enter into the Bradstock arrangements should that be appropriate. I hope that with that clarification the Committee can accept the clause. 
 Question put and agreed to. 
 Clause 109 ordered to stand part of the Bill. 
 Clause 110 ordered to stand part of the Bill.

Clause 111 - Loans to pay scheme benefits

Chris Pond: I beg to move amendment No. 452, in
clause 111, page 68, line 26, leave out 'This section' and insert 'Subsection (2)'.
 This is a minor drafting amendment. 
 Amendment agreed to. 
 Amendment made: No. 453, in 
clause 111, page 68, line 41, leave out from beginning of line to end of line 43 and insert 
 'the assessment period ends because the conditions in section 119(2) or (5) are satisfied,'.—[Mr. Pond .]

Nigel Waterson: I beg to move amendment No. 410, in
clause 111, page 68, line 45, after 'scheme' insert 
 '(but not from their personal assets)'.
 This is a small point, but one that is thought to be important by those who know about such things. The clause gives the board power to make loans to an eligible scheme and subsection (3) sets out the circumstances in which they are repayable by the trustees. I am advised that it should be made clear—possibly in the Bill—that they are repayable out of the assets of the scheme, not from the trustees' personal assets. I am sure that trustees would be relieved if that were so.

[Mr. John Robertson in the Chair]

Chris Pond: The amendment tabled by the hon. Gentleman is not necessary because under the current wording of the clause trustees or managers would not in any case be held personally liable. The reference to trustees or managers refers only to their legal capacity as trustees or managers of a scheme, not to any personal agreements entered into by them. I hope that with that assurance the hon. Gentleman will withdraw his amendment.

Nigel Waterson: I am happy to do so, since what the Under-Secretary said is on the record. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Amendment made: No. 454, in 
clause 111, page 69, line 2, after '(3)(b)', insert '(i)'.—[Mr. Pond.]
 Clause 111, as amended, ordered to stand part of the Bill.

[Mr. James Cran in the Chair]

Clause 112 - Board's obligation to obtain

Amendments made: No. 455, in 
clause 112, page 69, line 25, leave out 'Chapter' and insert 'section'.
 No. 456, in 
clause 112, page 69, line 32, leave out 'those purposes' and insert 
 'the purposes of this section'.—[Mr. Pond.]
 Clause 112, as amended, ordered to stand part of the Bill. 
 Clause 113 ordered to stand part of the Bill.

Clause 114 - Binding valuations

Amendment made: No. 457, in 
clause 114, page 70, line 20, leave out 'determination' and insert 'approval'.—[Malcolm Wicks.]
 Clause 114, as amended, ordered to stand part of the Bill.

Clause 115 - Schemes which become eligible schemes

Question proposed, That the clause stand part of the Bill.

Nigel Waterson: The clause is one of those shell clauses that do not really give much away about what they mean. Inevitably, it begins, ''Regulations may provide . . . '' It is hardly worth my breath to ask, but I assume that there are no draft regulations in the offing, and we cannot see what will be in them. It would be helpful if the Minister could walk us through what might be in the regulations, when they appear.
 As I understand the clause, the board has to satisfy itself that what was otherwise an eligible scheme 
''was not such a scheme throughout such period as may be prescribed''.
 Again, it is a bit difficult to comment until we get some idea of what kind of period we are talking about. The clause goes on to say that 
''the Board must refuse to assume responsibility''.
 I am lost as to what kind of situation the clause is trying to deal with, and it would be helpful if the Minister could talk us through the thinking behind it.

Chris Pond: Draft regulations are not yet available. I wish to explain the overall purpose behind the clause, which, as the hon. Gentleman says, is to protect the PPF from abuse by schemes that manipulate their structure in order to become eligible for PPF compensation, when they were not eligible, and thus subject to the requirement to pay the levy, in a prescribed period preceding the assessment date. The clause is essential to stop abuse by schemes and to protect businesses from subsidising such schemes through the pension protection levies.
 Without the clause, the PPF could be required to pay compensation to any scheme that manipulated itself so as to become eligible to benefit from the PPF. 
 The hon. Gentleman asked for examples, such as schemes that convert benefits from money purchase schemes into final salary schemes. The provision sets out that regulations may prescribe the period that the board can refuse to assume responsibility for a scheme in respect of changes made to its structure. 
 The intention is that a scheme will be required to have been an eligible scheme, and thus to have paid the levy, for three years in order to be taken over by the PPF. When a scheme has been established for less than three years, in order to be taken over by the PPF it will have to have been an eligible scheme from the date of entitlement to the date of the insolvency event, or clause 101 application or notification. 
 The clause requires the board to issue a withdrawal notice ending its involvement with a scheme to the regulator, trustees and managers of the scheme and any insolvency practitioner acting in relation to the employer when it is required to refuse to assume responsibility for a scheme. It is crucial that the PPF is able to protect itself against moral hazard, so that the fund will be sustainable in the long term, and that responsible levy-paying employers do not subsidise those who would seek to manipulate the PPF rules. 
 In answer to the specific questions raised by the hon. Gentleman, I can say that the three-year period will not be specified in primary legislation, so that the PPF board will have the flexibility to protect itself against moral hazard. Specific periods are not usually specified in primary legislation, so as to ensure that it is not too restrictive. 
 Question put and agreed to. 
 Clause 115 ordered to stand part of the Bill. 
 Clause 116 ordered to stand part of the Bill.

Clause 117 - Circumstances in which Board ceases to

Amendment made: No. 458, in 
clause 117, page 72, line 16, leave out 'before the end of' and insert 
 ', and no further insolvency event occurs in relation to the employer, during'.—[Malcolm Wicks.]

Malcolm Wicks: I beg to move amendment No. 380, in
clause 117, page 72, line 30, after 'occur' insert 
 'before the end of the period of six months beginning with that date'.
 It might be helpful if I briefly set the amendment in context before I talk about it specifically. Clause 117 provides for circumstances in which the board ceases to be involved with an eligible scheme on the occurrence of a withdrawal event. The so-called withdrawal events provided for are when a scheme rescue notice is issued by an insolvency practitioner, the board confirms a scheme rescue in cases where no insolvency practitioner is involved, and the board refuses to assume responsibility for a scheme as a result of a determination under clauses 115 and 116 on the grounds of moral hazard. In circumstances where a withdrawal notice is issued, the involvement of the PPF will cease and the scheme will either run on 
 following a scheme rescue or proceed to wind-up outside the PPF. 
 The clause is crucial in defining a key stage in the PPF entry process, and following the completion of any appeals process applicable or resolution of any outstanding appeals. The withdrawal notice marks the end of the assessment period of such schemes. This is essentially a drafting amendment to clarify the process set out in clause 117, which provides for circumstances in which the board ceases to be involved with an eligible scheme on the grounds of a withdrawal event. 
 Amendment agreed to. 
 Clause 117, as amended, ordered to stand part of the Bill.

Clause 118 - Consequences of the Board ceasing to

Amendment made: No. 381, in 
clause 118, page 73, line 21, leave out paragraph (a).—[Malcolm Wicks.]
 Clause 118, as amended, ordered to stand part of the Bill.

Clause 119 - Requirement to wind up schemes with

Amendments made: No. 460, in 
clause 119, page 73, line 38, leave out subsections (1) to (5) and insert— 
 '(1) Where, in relation to an eligible scheme, an assessment period within section 104(2) or (4) comes to an end because the conditions in subsection (2) of this section are satisfied, the trustees or managers of the scheme must— 
 (a) wind up the scheme, or 
 (b) where the winding up of the scheme began before the assessment period (whether by virtue of section 177 or otherwise), continue the winding up of the scheme. 
 (2) The conditions are— 
 (a) that subsection (2) or (2A) of section 120 (scheme rescue not possible but scheme has sufficient assets to meet the protected liabilities) applies in relation to the scheme, 
 (b) that— 
 (i) the trustees or managers did not make an application under that section or section [schemes required to wind up but unable to buy out liabilities](1) within the authorised period (within the meaning of section 120(4A)) (or any such application has been withdrawn), or 
 (ii) if such an application was made, it has been finally determined, and 
 (c) that, if an application was made under section 120, the Board is not required to assume responsibility for the scheme by virtue of section 121(2). 
 (3) For the purposes of subsection (2)(b)(ii) an application is not finally determined until— 
 (a) the Board has issued a determination notice in respect of the application under section 121 or, as the case may be, [schemes required to wind up but unable to buy out liabilities], 
 (b) the period within which the issue of the notice may be reviewed by virtue of Chapter 6 has expired, and 
 (c) if the issue of the notice is so reviewed— 
 (i) the review and any reconsideration, 
 (ii) any reference to the PPF Ombudsman in respect of the determination, and 
 (iii) any appeal against his determination or directions, 
 has been finally disposed of. 
 (4) Where, in relation to an eligible scheme, an assessment period within section [closed schemes: further assessment periods](2) comes to an end because the conditions in subsection (5) of this section are satisfied, the trustees or managers of the scheme must continue the winding up of the scheme begun (whether in accordance with this section or otherwise) before that assessment period. 
 (5) The conditions are— 
 (a) that an application is made by, or notice is given to, the trustees or managers of the scheme under section [applications and notifications where schemes have insufficient assets], 
 (b) that the valuation obtained by the Board in respect of the scheme under section [duty to assume responsibility for closed schemes](3) has become binding, and 
 (c) that the Board is not required to assume responsibility for the scheme by virtue of section [duty to assume responsibility for closed schemes](1).'.
 No. 461, in 
clause 119, page 74, line 35 , leave out '(4)(a)' and insert '(1)(a)'.—[Malcolm Wicks.]
 Clause 119, as amended, ordered to stand part of the Bill.

Malcolm Wicks: I beg to move amendment No. 459,
That Clause 119 be transferred to the end of line 45 on page 76.
 As was mentioned earlier during our debates on clause 104, the amendments on closed schemes mean that clause 119 should now be transferred to the end of line 45 on page 76.

George Osborne: Ah!

Malcolm Wicks: I did not realise that this was so interesting. That will mean that what is now clause 119 will stand part of the Bill after the current clause 121.

Nigel Waterson: I am grateful that, as a courtesy, we were given advance warning of this motion, although for the life of me I still do not really understand why we are moving the hapless clause 119 within the batting order, but it obviously matters to somebody, so who am I to stand in their way?
 Question put and agreed to.

Clause 120 - Application for reconsideration

Amendments made: No. 462, in 
clause 120, page 75, line 7, leave out from beginning of line to 'for' in line 8 and insert 
 'Where subsection (2) or (2A) applies in relation to an eligible scheme, the trustees or managers of the scheme may make an application to the Board under this section'.
 No. 463, in 
clause 120, page 75, line 10, leave out subsection (2) and insert— 
 '(2) This subsection applies where— 
 (a) a notice confirming that a scheme rescue is not possible in relation to the scheme has been issued under section 96(2) and the trustees or managers have received a copy of that notice under section 96(6) (or, in a case to which section 97 applies, under subsection (4) of that section), 
 (b) the valuation obtained by the Board under section 112 in respect of the scheme has become binding, and 
 (c) the Board would have been required to assume responsibility for the scheme under section 99 but for the fact that the condition in subsection (2)(a) of that section was not satisfied. 
 (2A) This subsection applies where— 
 (a) the Board has issued a notice under subsection (2) of section 102 confirming that a scheme rescue is not possible in relation to the scheme and the trustees or managers have received a copy of that notice under subsection (4) of that section, 
 (b) the valuation obtained by the Board under section 112 in respect of the scheme has become binding, and 
 (c) the Board would have been required to assume responsibility for the scheme under section 100 but for the fact that the condition in subsection (2)(a) of that section was not satisfied.'.
 No. 464, in 
clause 120, page 75, line 19, leave out subsection (4) and insert— 
 '(4) An application under this section must be made within the authorised period. 
 (4A) In this section ''the authorised period'' means the prescribed period which begins— 
 (a) where subsection (2) applies, with the later of— 
 (i) the day on which the trustees or managers received the copy notice mentioned in paragraph (a) of that subsection, and 
 (ii) the day on which they were notified of the binding valuation mentioned in paragraph (b) of that section, and 
 (b) where subsection (2A) applies, with the later of— 
 (i) the day on which the trustees or managers received the copy notice mentioned in paragraph (a) of that subsection, and 
 (ii) the day on which they were notified of the binding valuation mentioned in paragraph (b) of that subsection.'.—[Mr. Pond.]

Chris Pond: I beg to move amendment No. 382, in
clause 120, page 75, line 36, after 'quotation' '' insert 
 ', in relation to a scheme,'.

James Cran: With this it will be convenient to discuss the following:
 Government amendments Nos. 383, 384 and 386 to 388.

Nigel Waterson: May I make a point that is not about these amendments as such? I appreciate that we may be running ahead of ourselves slightly. I lay no blame anywhere for that, but may I repeat our informal agreement that we should get some notes about new Government amendments so that we can prepare ourselves in advance? As I say, I do not think that it is
 anybody's fault that that has not happened—we have suddenly put on a turn of speed—but if we can ensure that we have notes soon for the Government amendments that will come up next Tuesday, that would be helpful.

Chris Pond: We certainly note that point, and will do whatever we can.
 Amendment agreed to. 
 Amendments made: No. 465, in 
clause 120, page 75, line 40, after 'scheme', insert 'from the reconsideration date'.
 No. 383, in 
clause 120, page 75, line 46, leave out from 'member's' to 'rights' in line 47 and insert 
 'entitlement or accrued rights (including pension credit rights within the meaning of section 124(1) of the Pensions Act 1995 (c.26)) under the scheme rules (other than his entitlement or'.
 No. 466, in 
clause 120, page 75, line 48, leave out from 'benefits),' to end of line 2 on page 76 and insert 
 'whichever benefits can, in the case of that member, be secured at the lower cost.'.
 No. 384, in 
clause 120, page 76, line 2, at end insert— 
 ' ''scheme rules'', in relation to a scheme, means— 
 (a) the rules of the scheme, except so far as section 129 of the Pension Schemes Act 1993 (c.48), section 117 of the Pensions Act 1995 (c.26) or section 230 of this Act overrides them, 
 (b) any provision of any of those Acts which overrides or modifies any of the rules of the scheme by virtue of one of the provisions mentioned in paragraph (a), and 
 (c) any provision which the rules of the scheme do not contain but which the scheme must contain if it is to conform with the requirements of Chapter 1 of Part 4 of the Pension Schemes Act 1993 (preservation of benefit under occupational pension schemes).'—[Mr. Pond.]
 Clause 120, as amended, ordered to stand part of the Bill. 
 Further consideration adjourned.—[Margaret Moran.] 
 Adjourned accordingly at fourteen minutes past Four o'clock till Tuesday 30 March at half-past Nine o'clock.